Building the PM organization: Trends in salaries, supply, and development

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Mark Bashrum, Vice President, Corporate Marketing, ESI International

Many project organizations are increasingly challenged with talent supply, development, and retention issues as projects grow in size and complexity to cope with the demands of prescribed business objectives. With so many priorities competing for organizational attention, one issue is clear: winning the war for project talent is no longer an option; developing a strong project community must be at the forefront of executive mindshare.

In this whitepaper, we will examine critical issues surrounding the development of a sustainable project organization, consider market trends and variables impacting development decisions, and discuss a path for the proactive planning and development of the project community. We will start with the environment driving the need for talent in the project organization and then move into those factors that need to be understood in order to develop an informed strategy. Finally, we will make recommendations for engaging the rest of the organization and implementing a path forward.

Project Drivers: The Perfect Storm

Projects all around the world are getting more attention than ever before in an environment of tight market competition, squeezed margins, budgetary constraints, and stakeholder scrutiny. The pressure to do better with less has never been more apparent for project professionals. Even as it increasingly dawns upon business executives that the transformation to a world-class organization starts with great project management, poor performance continues to plague projects and failure rates remain abysmally high, resulting in a shortfall of value and benefits realization. Core industries, in particular, are being driven to change through implicit and explicit business pressures.

The chart below examines the dynamics of four distinct industries and the specific drivers impacting projects and talent management issues in their project communities. Though these drivers have always been present in the business environment, the scale and simultaneous occurrence is creating a perfect storm when it comes to project talent.

Industry drivers of projects

Exhibit 1: Industry drivers of projects

It is clear that core sectors of the economy are in flux and that the resulting drivers are having a meaningful impact on the number, complexity, and types of projects being implemented by organizations. The key question is: What should project organizations consider when addressing these changes, and what steps should they take to proactively plan for the impact?

The Impact on Project Talent

High-performing project professionals are the difference between project success and failure. It is imperative that organizations connect world-class project capabilities to a strong and sustained project talent management strategy. Developing a practical plan for proactively building and developing a project organization takes some thought and diligence, but it doesn't have to be rocket science.

Here are the key questions to which you will need to know the answers:

  • Is your project community equipped to meet the current and future demands of the business?
  • If not, where do gaps exist? Quantity, quality, or both?
  • What is the availability of project talent in the market to address caps? What are the costs?
  • To what extent is your organization able to support the internal development of project talent? How effective are your development programs? What are the costs?

Understanding the Supply and Demand for Project Talent

Understanding the supply and demand for project talent in an organization is of course easier said than done. Organizational priorities shift, portfolio visibility may be limited, and resource allocation decisions may not be in your hands. Still, this is the heart of talent management and, as a manager of talent, you must understand as much as you possibly can if you hope to meet the demands of the business. The key is to be practical and to start with what you do know, and then make informed estimates for everything else. Typically, it is the demand side of the equation that is most difficult to gauge. If your organization has strong PPM systems and processes, your business environment is reasonably stable, and you have resource-level access to the information, then you are set. More often than not, however, it is not that easy.

The easiest approach is to start with what you know—the history of project demand. Inventory your projects over the past few years and seek to identify trends. On what types of projects has your team been engaged? Where did they originate (business sponsor)? How were they staffed? What level of project management skill was required (junior, mid, senior)? Prioritize required competencies (interpersonal, technical, leadership)? If the future looks like the past, this will give you a good perspective of what to expect. Additionally, you will want to consider other drivers of project demand, including:

  • Key organizational initiatives and how they are likely to impact your team
  • Trends in outsourcing within the organization
  • The impact of Industry trends on project demand (see Exhibit 1)

Fortunately, the supply side is easier—as long as you keep it practical. Again, focus on what you know and what you can easily find. A good starting point is to take an inventory of your team and quantify as much as possible. By knowing the team's relative strengths and weaknesses, you will at least have an understanding of likely gaps and make more informed staffing, development, and allocation decisions as project demands change.

There are many ways to assess project team effectiveness; however, you should always consider the cost/benefit trade-off. In other words, the juice has got to be worth the squeeze. A knowledge and practice assessment is a quick and generally effective way to understand the gaps between what a project manager knows and what he puts into practice. Additionally, a knowledge and practice assessment provides a jumping-off point for resolving gaps—typically additional coaching or training. Once a skill or activity is identified as important, it is a matter of whether the project manager understands and practices it. Lack of understanding is a training opportunity, where lack of practice may be a coaching/management opportunity. Here are the fundamental steps and deliverables for performing a knowledge and practice survey:

Steps to building a project management knowledge and practice survey

Exhibit 2: Steps to building a project management knowledge and practice survey

Exhibit 3 charts the results of a knowledge and practice survey performed on an oil and gas company. In this instance, a national oil company wanted to assess if their PMO was adding value to their organizational capacity with a deliverable of identifying and prioritizing specific areas that major stakeholders will find of immediate value to the organization. The assessment started with face-to-face interviews of department heads complemented with an online survey that assessed the gap between the knowledge and practices of project managers. Key inputs from the survey and interviews were developed and prioritized into short-term and long-term needs, with recommendations on practical action items to take and realistic KPIs to measure success.

When practice exceeds knowledge, as is the case in Exhibit 3, there is a strong likelihood that people are working in different ways to achieve their results—and therefore potentially inconsistently and non-optimally—and with no common understanding of what (by industry standards) represents best and most efficient practice.

Oil and gas company sample K&P survey

Exhibit 3: Oil and gas company sample K&P survey

Quality is only one component to consider when evaluating the readiness of your project organization; quantity is another. According to the ESI 2013 Project Manager Salary & Development survey of over 1,800 project managers and managers of project managers, there appears to be a significant shortage of project managers in most organizations. Overall, 83% of project organizations reported that they were understaffed at some level of proficiency, and 44% of the reported shortages were for senior-level project managers (Level 3) capable of managing highly integrated, high-risk projects. In Exhibit 4, Level 1 = Project managers capable of managing small, low-risk projects, Level 2 = Project managers capable of managing medium-size, moderate-risk projects, and Level 3 = Project managers capable of managing large, highly integrated projects.

Current staffing shortages

Exhibit 4: Current staffing shortages

Understanding the Availability and Cost of Acquiring Talent

When demand outpaces supply, as it does in 83% of organizations surveyed, those leading project teams have three choices: buy, build, or rent. While outsourcing (renting) fills the gap for many organizations, it creates another set of sourcing and vendor management issues that must be addressed by project communities. However, since outsourcing is a strategic decision and is typically outside the remit of the project community, we will focus on the build versus buy decision.

The ESI 2013 Project Manager Salary and Development Survey highlights some of the issues related to buying talent. Not surprisingly, the survey revealed that finding and hiring effective project managers is difficult for most organizations. However, finding qualified senior-level talent is by far the biggest challenge. According to the survey, 48% of respondents report that it is very difficult to find senior talent, and 89.4% report that it is very difficult or somewhat difficult. Given that 44% of talent shortages are for these positions, and that senior managers are responsible for managing the largest, highest-risk projects in the organization, the overall availability and staffing outlook for many respondents looks bleak.

Availability of project talent

Exhibit 5: Availability of project talent

Understanding the types of projects coming down the pike and consequentially the requirements of the project community is paramount in creating a talent management strategy. Equally important, however, is understanding the availability of required talent when a shortage exists within the organization. Talent leaders need to have a solid recruitment strategy and have a thorough understanding of competitive salary and compensation packages in their local markets and industries.

Understanding salaries and how they are impacted by experience, region, and industry is an important component of creating a talent management framework, as it helps to evaluate the projected human capital investment to which organizations must commit. According to the ESI survey, project manager salaries are remarkably consistent across regions of the country, but not across industries. In terms of salary impact, the region of the country mattered very little for early career project managers, where the percent variance between the high and low was only 7.4%. The regional salary gap widens, however, as project managers become more skilled, reaching almost 12% percent for Level 3 managers.

The parity did not hold up when considering sectors, however. In fact, the regional outliers that did exist, namely in the Southwest and Mid-Atlantic, were largely influenced by the high concentration of energy sector and federal government project managers, both of which were higher paid than their counterparts in other industries. The percent variance among Level 3 project managers across sectors was in excess of 67%.

Salaries by region and level

Exhibit 6: Salaries by region and level

Salaries by industry and level

Exhibit 7: Salaries by industry and level

Compensation costs are not the only considerations when acquiring project talent; time-to-proficiency can also represent a significant investment, particularly in more technical industries. Bringing in an external project manager does not necessarily guarantee immediate productivity. According to the ESI survey, hiring project managers from outside of the organization is more expensive than one might think. The ramp-up time to get an experienced project manager up to speed in a new environment may take longer than many might expect. On average, bringing an otherwise experienced project manager up to a level of effectiveness in a new organization takes between six and 10 months depending on the size and complexity of the projects they are managing.

Time to proficiency

Exhibit 8: Time to proficiency

When evaluating acquisition costs, it is important to consider both hard and soft costs. Hard costs such as recruitment fees and compensation are easy to estimate; however, soft costs like time-to-proficiency may take a little more effort. Still, it is a worthwhile investment in time.

Understanding the Organization's Ability to Develop Talent

Developing project talent is typically a core function of any project organization. Because talent development is done both in lieu of and in conjunction with hiring external resources, and because it has a positive impact on both the business and employee, development is always good practice. In the short-term, organizations make staffing decisions when needs arise. In the mid- and long-term, however, this reactive approach is not in the best interest of the organization. There is strong evidence to suggest that actively developing the project community is less costly and more effective than knee-jerk reactions to short-term staffing needs.

Although the need for development might be intuitive, project organizations still need to understand and communicate benefits to the business in a very tangible way. Start with examining how training is conducted in the organization and gain an understanding as to how deep the training impacts participants. The higher the quality of the training, the more impact it has on performance. Knowledge and comprehension are only the beginning. More critically, how well is training being applied, and how is it integrated with experience to elevate performance?

Learning impact

Exhibit 9: Learning impact

Correlation between job support and business impact

Exhibit 10: Correlation between job support and business impact

Any learning interaction is only effective if the project manager is supported back on the job through accountability and coaching from his manager. For this reason, it is also imperative to evaluate the support structure for development in your organization. This is often an overlooked component in project management learning initiatives. For example, does the organization have a coaching and mentoring program in place? Is training consistently offered? Does the organization have a PMO with an active training mandate? Exhibit 10, which correlates the responses of several thousand project managers in over 150 enterprises, demonstrates the importance of on-the-job support.

Ultimately, it is the impact of development efforts that matter, and for this reason you should consider several indicators when evaluating the effectiveness of your programs. One measure is time-to-advancement. Development programs should accelerate the growth and capability of project managers.

According to the ESI survey, project managers advance at a close-to-linear rate from the time they start as new graduates (Level 0) to the time they are managing complex, highly integrated projects (Level 3). The average project manager took just over seven years in the profession to achieve a level of proficiency where he or she could manage larger complex projects. During this same period, the average salary nearly doubled from $54,953 to $103,047.

Years to advancement

Exhibit 11: Years to advancement

Development efforts should accelerate this growth. This was certainly the case in the survey, where respondents indicated that training significantly advanced their performance and accelerated their advancement. According to the survey respondents, five training days per year of project-focused training reduced the amount of time to advance from an entry-level project manager (Level 0) to a senior project manager (Level 3) by 12.6 months, or over 21%. Training accelerates advancement across all levels of competency, but is most beneficial at either end of the proficiency scale.

Time saved by training (in months)

Exhibit 12: Time saved by training (in months)

Putting It All Together: Developing a Plan Forward

Developing a proactive talent management strategy for your project community requires taking a step back from the knee-jerk approach we all fall victim to when reacting to the immediate demands of the business. Outsourcing and hiring from the outside will always be pieces to resolving the resource puzzle; however, more often than not they both tend to be reactive measures in response to short-term needs. A mid- and long-term approach will likely include these as well as an internal development component, but no matter the mix, the selected path forward should be an informed one. Here are the steps you can take to ensure that you build the right approach for your project community.

Step 1: Understand the drivers impacting supply and demand for project talent and determine requirements that are specific to the organization's current and future needs in its project capabilities.

To gain understanding of demands for project talent, go to resources such as central PPM and resource management systems, review project artifacts and inventory historic demand, consider industry trends impacting project demand, and closely monitor the impact of key organizational initiatives on the demand for project talent. On the supply side, review current resource allocations to understand shortages, review outsourcing trends and policy within your organization, and access your project teams to understand critical skill and competency gaps.

Step 2: Understand the market availability and cost of acquiring talent.

At the time of this writing, a search on LinkedIn shows over 74,000 unfilled project manager-related job postings in the United States, a good indication of the strong, unabated demand for the role. Research indicates that a talent war is starting to emerge for mid-level and senior project talent, and that translates to shortages in supply and higher compensation levels. In order to match the demand side of the equation, you will need an aggressive recruitment strategy coupled with a thorough understanding of what compensation levels are appropriate across the skill levels you require.

Step 3: Understand your organization's capability to develop talent and understand the cost and effectiveness of your development programs.

Start with examining how training is conducted in the organization, including how deep the training impacts participants, how well the training is being applied, and how well it is elevating performance. Include on-the-job support by evaluating the accountability and coaching practices of managers. Answer critical questions. Does the organization have a coaching and mentoring program in place? Is training consistently offered? Does the organization have a PMO with an active training mandate?

Step 4: Create a mid- and long-term project talent management plan for your project community and solicit organizational support from key stakeholders.

Through the creation of a thoughtful plan supported by a thorough understanding of the activities detailed in this document, you should have a roadmap to make informed, proactive decisions project demands continue to escalate. Equally important, however, is to obtain buy-in from key stakeholders inside and outside of the project community. As with projects, gaining organizational commitment is paramount to the implementation of a successful talent management plan for your project community.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2014, Mark Bashrum
Originally published as a part of the 2014 PMI Global Congress Proceedings – Phoenix, Arizona, USA

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